SCF goes into receivership
The Herald reports:
South Canterbury Finance Limited announced today that it has been unable to complete a recapitalisation and restructure.
As a result, the Company would have been unable to certify to Trustees Executors Limited, in accordance with the terms of its debenture trust deed with Trustees Executors Limited, that it was compliant with various financial covenants under the debenture trust deed for the financial year ended 30 June 2010.
Accordingly, South Canterbury Finance Limited has requested Trustees Executors Limited to appoint a receiver in respect of the whole of its undertaking and assets, and Trustees Executors Limited has done so.
This is not the end of the road – it means TEL now has control of SCF. However it strongly indicates that the Government’s guarantee of deposits will be called on.
Personally I am pleased the Government didn’t attempt a King Canute.
Bernard Hickey writes:
The government’s decision not to support a recapitalisation plan for South Canterbury Finance was the right one. Receivership was the cleanest, simplest and ultimately safest option for both taxpayers and investors.
The government will now have to pay out around NZ$1.6 billion to 35,000 depositers in South Canterbury Finance that were covered under the extended guarantee scheme.
They have already paid out today $1.7 billion. Ouch. However some of that will be recovered over time.
It was clear from Prime Minister John Key’s comments yesterday about the administrative and institutional mess inherited by CEO Sandy Maier that he was no fan of the way Allan Hubbard had created and run the business as part of his own charitable small business empire.
Hubbard was making no interest ‘helping hand’ loans to young farmers and then mortgaging his own assets to make the interest payments.
Which is well intentioned. But he lent too much bad money, and in the end he has left the taxpayer with the bill. That is not generosity. Allan Hubbard is not the victim here – the taxpayer is.
August 31st, 2010 at 10:06 am
As the Government’s guarantee will be called in, it is imperative that the Govt. move to appoint it’s own receiver so it, not TEL is in control.
August 31st, 2010 at 10:10 am
I know we poor old taxpayers are committed to paying back the investors as hard as that seems to those of us who have borne our own losses and worked hard to restore savings but it’s hard to stomach paying them 8% interest on top. It was always an unrealistic return and getting their initial investment back should be more than enough.
And spare us any more rich old sugar daddies hung up on the hubris of their generosity with other people’s money. The Kiwi worship of the plain man driving a modest car and living in a modest house can blind us to what is really going on.
We need to seek out the happy medium between the Hotchins and the Hubbards of this world.
August 31st, 2010 at 10:14 am
Actually, the government DID attempt a King Canute with Blinglish cancelling hsi o/s trip. I guess you need to brush up on your history.
August 31st, 2010 at 10:18 am
And MyNameIsJack reminds us that, no matter what the situation, someone, somewhere will blatantly misrepresent it.
August 31st, 2010 at 10:28 am
Actually, the government DID attempt a King Canute with Blinglish cancelling hsi o/s trip. I guess you need to brush up on your history.
Oh FFS! You would have bitched the loudest if English had boarded the plane. Nothing but a scumbag fucken Labour hypocrite!
August 31st, 2010 at 10:44 am
Great.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10670071
That will make a nice addition to the balance sheet.
August 31st, 2010 at 10:50 am
Makes you wonder, how SCF qualified for the govt. guarantee scheme in the first place.
My imagining, is that failing companies would not qualify for the guarantee. SCF must have been in serious trouble for several years at least.
August 31st, 2010 at 10:55 am
So, South Canterbury Finance was offering deposit rates of up to 8.5% just a few weeks ago. Some brokers were saying you’d be mad not to take these up – even if you had to borrow the money to do so. And they were right. Because it turns out money is SCF is entirely safe! Because of the govt guarantee. So why was it offering desosot rates of 8.5%??? What a scam.
August 31st, 2010 at 11:00 am
Once again I as a tax payer have to fork out to keep some other bastard solvent.
It is not enough for me to have to pay for thousands of low life who do not want to work, it is not enough that I am subsidising scum to breed now I have to cover those who took an investment risk that did not come off.
Fuck them, they took the risk and they should take the loss.
August 31st, 2010 at 11:00 am
MyNameIsJack (1,415) Says:
August 31st, 2010 at 10:14 am
Actually, the government DID attempt a King Canute with Blinglish cancelling hsi o/s trip. I guess you need to brush up on your history.
You are so needing medication. Soon and strong. Or you are just a simple onanist.
August 31st, 2010 at 11:06 am
Ahh – Nice of us all to help out isn’t it… privatise the profits and socialise the losses, the new corporate mantra for the 21st century.
When will there be a viable alternative to the National/Labour axis…?
August 31st, 2010 at 11:10 am
May just be me, but whilst this chap has a great report from all the folk he has ‘helped’ with other people’s money.
He, in recent footage gives me the creeps. And I do mean in a malevolent way.
August 31st, 2010 at 11:12 am
Although I generally disagree with government guarantees and bailouts. Isn’t socialising the losses basic left wing belief? That the government is there to help in times of need with unemployment benefits etc etc.
August 31st, 2010 at 11:13 am
“Treasury has agreed that all debenture, deposit and bond holders covered under the company’s trust deed arrangements will be paid what they’re owed in principal and interest up to today, regardless of their eligibility under the guarantee scheme.”
From Stuff – surely the government can’t be THAT stupid.
August 31st, 2010 at 11:16 am
Typical, we still get the crumbs to pick up from the pinko, socialist Cullen and his flawed government guarantee scheme.
Fuck I hate the left
August 31st, 2010 at 11:18 am
“Typical, we still get the crumbs to pick up from the pinko, socialist Cullen and his flawed government guarantee scheme.
Fuck I hate the left”
The guarantee was reaffirmed ealier this year when, if you recall, National were in power.
August 31st, 2010 at 11:21 am
“regardless of their eligibility under the guarantee scheme.”
From Stuff – surely the government can’t be THAT stupid.”
And this is where the politics might come in. The extra amount may not be that much in comparison, so for the cost of a relatively little (yet absolutely huge by any other standards) amount, the Govt can be the white knights.
August 31st, 2010 at 11:22 am
Sonny – Socialists (real ones) would aim to socialise the profits too (e.g. via various benefits etc). Can’t think of too many of the big institutions that were interested in that, despite their rapid reaching for available handouts when times are grim (Goldman Sachs et al).
Some might argue that Hubbard was doing that, but his ‘charity’ was pretty irresponsible, with devastating consequences on many lives, the environment, and large sectors of the NZ economy. Thanks Mr Hubbard, for being so ‘generous’…
August 31st, 2010 at 11:26 am
And none of Hubbard’s starry-eyed supporters stop to ask themselves why the nasty hard-hearted banks wouldn’t make the loans he so generously dished out to all and sundry. Yes, some may have been good bets but it’s a hell of a risk when it’s not your money.
So do we conclude that much of the South Island ‘backbone’ was based on shonky loans? As a former South Islander myself I can hear my Scottish forebears turning in their graves!
And I have to point out that, at the time, the guarantee seemed a Good Thing. But times change quickly and now, once again, the poor old taxpayer foots the bill. Can’t we at least escape the interest???
August 31st, 2010 at 11:29 am
All this just proves the government should stick to their knitting because they can’t run a business for shit. Tell me what sort of insurance company would sell insurance to a company already under investigation, for fucks sake. And to add insult to injury the poor bloody taxpayers have to pay out higher rates to cover the larger interest rates offered by SCF. Why wasn’t interest fixed to rates similar to those that government owned institutions pay, i.e kiwibank, those buggers don’t pay 8 bloody percent.
August 31st, 2010 at 11:30 am
“And I have to point out that, at the time, the guarantee seemed a Good Thing. ”
It wasn’t. We had to give the guarantee to the banks (not that they actually needed it) largely for diplomatic reasons (once the Aussies guaranteed the banks we would be freeloading on them if we didnt). And banks are a vital part of the economy. There was no need to guarantee the finance companies, they aren’t a strategic part of the economic system and their business model was flawed. Renewing the guarantee was mindlessly stupid.
August 31st, 2010 at 11:32 am
Surely the scheme wasn’t intended to prop up wayward businesses – so how are we covering SCF? The final term of the Labour government was well known for its shonky legislation (among other things), but as Kimble states: “The guarantee was reaffirmed ealier this year when, if you recall, National were in power.”
That’s the bane of it. We expect something like this from the last term of the previous labour government, but we voted national for a change, didn’t we. So what the hell happened…?
edit: I see I have just repeated KiwiGreg’s points, which were posted while I was typing – sorry for the repetition…
August 31st, 2010 at 11:46 am
“All this just proves the government should stick to their knitting because they can’t run a business for shit.”
Ummm, it doesnt prove that at all. They werent running SCF, so their actions cannot call into question their business running ability.
Now, I dont think the government can run a business worth shit, and if they can it shows that the business shouldnt be run by government. But your statement is still wrong.
Sam, once the guarantee was offered it is very difficult to remove it. The issues to do with initiating the scheme are very different from those regarding the extension of it. When people here complain that National didnt reverse Labours stupid policies, I dont think they are considering the right issues. They seem to be wanting National to reverse the policy in yesterdays world.
August 31st, 2010 at 11:56 am
It didn’t have to be removed, its terms could have at least been amended to make it a better piece of legislation. By extending it in the already established scope, National endorsed – or re-enacted – rubbish legislation. Aren’t we supposed to expect more from the party of business?
August 31st, 2010 at 12:07 pm
Kimble I know the government doesn’t run SCF. All I was trying to say that when the government offered a guarantee they are effectively becoming an insurance company, they took premiums, do you think for one moment a privately owed insurance company would insure a company or individual all ready under investigation.
August 31st, 2010 at 12:31 pm
Bernard Hickey got it right in his summary of today’s decision:
The government’s decision not to support a recapitalisation plan for South Canterbury Finance was the right one. Receivership was the cleanest, simplest and ultimately safest option for both taxpayers and investors.
The government will now have to pay out around NZ$1.6 billion to 35,000 depositers in South Canterbury Finance that were covered under the extended guarantee scheme
This outcome although costly to the taxpayer is at the end of the day the best deal that could be put together that saves Southland from experiencing ruin.
P.S. Does this mean that Aucklanders get a better name down south?
August 31st, 2010 at 12:33 pm
Who were the two unlucky guys who had the dubious honour of signing a $1.7B cheque.
I think SCF management and staff deserved kudos for having ‘clean’ records so the Govt. could pay out with confidence.
However tyhey need a good kick in the backside for selling off the ‘best’ loans to stay afloat rather than hitting the panic button earlier on.
August 31st, 2010 at 12:43 pm
Kimble by the tone of your comments over the last few days it seems obvious you have some fifth-ranking debenture rubbish in SCF.
Are you pleased that my taxes are repaying your investment, with interest? If so perhaps you could be a bit more grateful to the other commenters on here.
August 31st, 2010 at 1:10 pm
So the next question is will Mr Hubbard be prosecuted? I presume he’s broken securities laws by offering securities without backing, which was the original problem reported, and the magnitude of the problem may imply massive fraud. Jail time for Maier and Hubbard?
August 31st, 2010 at 1:57 pm
Is the taxpayer really footing the bill? How much did the banks and finance companies pay into the scheme in the first place? Surely the taxpayers would only be paying the shortfall (if any) Does anyone know the actual figures?
August 31st, 2010 at 1:57 pm
“Kimble by the tone of your comments over the last few days it seems obvious you have some fifth-ranking debenture rubbish in SCF.”
Nope, I dont have a single dollar invested with SCF or Hubbard. I have already said I thought the guarantee was a bad idea, and I was actually saying it at the time it was introduced. I was worried about just this sort of thing.
The government was GIVING AWAY MONEY, I wouldnt be so quick to blame investors in the company’s debt when it is exactly what the situation told them to do. Now they can expect to get bailed out because the government said it would. This isnt like the US where Fanny and Freddie had an implied government guarantee. SCF had an explicit guarantee.
“All I was trying to say that when the government offered a guarantee they are effectively becoming an insurance company…”
Except they arent an insurance company. They are a government. We dont want an insurance company running the country. It would be much MUCH worse if the government DIDNT do anything about SCF or Hubbards other misadventures because of they gave a guarantee on the debt. Think about it. Going by what you expected, you would be fine with the government not doing its actual job just to make a profit out of something.
As a rule, I dont want the government making a profit. If something can make a profit, it can probably be provided by the private sector.
August 31st, 2010 at 1:58 pm
ben posted at 1.10:
Ben, could you explain exactly what you mean by this? Securities without backing??? Which ones? What “security” did they offer? I’m not sure what you are getting at.
As for Kimble’s criticism of the guarantee scheme. I doubt the Government had any alternative when other countries, including Austsralia, introduced similar guarantee schemes. The fear money would be sucked out of NZ and there would be a far bigger disaster than has occurred with SCF.
August 31st, 2010 at 2:39 pm
“In the bad book, you might find there’s a number of related party loans in there. There’s a real tangle there between the bad book and him (Allan Hubbard),” English said.
He also revealed that Korda Mentha had been advising the government on South Canterbury since mid 2009.”
So, the Govt had knowledge of the SCF position before reaffirming the deposit guarantee scheme, and made no move to exclude dodgy practices from its coverage…?
They must have been planning for this very situation for a long time, in their usual ‘relaxed’ and amicable manner I guess… But they had an opportunity to exclude it, and chose not to. You can argue the rights and wrongs of this action, but it has to be noted that it was THIS government’s choice and it was a decision made with knowledge of its probable consequences
August 31st, 2010 at 3:09 pm
Jack5, a significant criticism I had at the time was how rushed the whole thing was and that the guarantee was given to all who applied without question. Australia guaranteed the banks (and by proxy the NZ banks too), not finance companies. I did not see any point in including finance companies.
Finance companies were not a favoured home for foreign capital, so capital flight is not a good enough reason to cover them. By covering them the government lowered its own credit quality.
August 31st, 2010 at 3:10 pm
The kindly old duffer Hubbard who drove around in his old beat up VW and his dear wife in the background knitting jumpers for deprived children have left an unholy mess for the tax-payer. I am disgusted. Surely there is a halfway house between the Hubbards and the wideboys at the other end of town.
August 31st, 2010 at 3:51 pm
Oh boy! From Stuff:
What breathtaking hypocrisory, stupidity and arrogance from Goff! The fact that SCF is simply the latest domino to fall from the chain reaction which STARTED AND ENDED under Labour’s terms, and has only been artificially propped up to present (again as started by the Labour govt) is apparently lost on Mr Goff.
August 31st, 2010 at 4:06 pm
What else would you expect from Goff? After all, he was very happy to fork out a fortune for a clapped out train set. Fortunately, this government – which has been taking very good advice – might well recoup a fair amount of the bail-out money while the trains are a financial black hole. Yet another Labour gift that keeps on giving.
August 31st, 2010 at 4:09 pm
A careful examination of the gummint accounts shows income from deposit guarantee fees was $74 mil in the 2009 year and $158 mil in the eleven months to May 2010 – giving a total of $232 mil fee income from the scheme.
So all you frothers and foamers at the mouth can go back to sleep because even if the gummint drops 200 mil on the SCF receivership, we are still 32 mil in front of the action, plus the accrued interest on the fees over the two years in question.
The ‘bail out’ as you call it will have cost tax payers not one penny. The real benefit we already have enjoyed. That is stability when the world was all a jitter two years ago.
I’d say all in all it’s pretty good risk management.
August 31st, 2010 at 4:23 pm
What poppycock Adolf. The amount the Government guaranteed was vastly beyond the resources of the Crown to honour. It was merely a paper illusion.
August 31st, 2010 at 4:49 pm
Its actually more than just 8% interest. If like me you bought SCF bonds in the last couple of months at 74 cents in the dollar, your return is closer to 35%.
August 31st, 2010 at 4:56 pm
Isn’t the net liability at least $600 million?? There wouldn’t appear to be much change from the $74+158million + interest from your figures if that is the case Adolf – or have I missed something obvious here…?
August 31st, 2010 at 4:57 pm
This country is in trouble. The Government is simply going to run out of money and by the vibes coming out of Wellington, there is no plan B.
August 31st, 2010 at 5:10 pm
Yes JimBob but we still all have our hands stuck out – teachers, radiologists, ACC, beneficiaries etc etc.
August 31st, 2010 at 5:12 pm
Shit that was a near thing. Just heard Cuncliffe on Larry Williams talking about SCF .At the end of the interview he claimed NZ was living beyond its means and has been doing so for years. Fuck I was that busy swearing at the tractor radio I just about ran over one of the girls eating her silage. Is this socialist git suffering from schizophrenia? Fuck these people are full blown noddys, was the last decade just a bad nightmare, if so I wish I could wake up. “Living beyond our means”, fuck off you retard.
August 31st, 2010 at 5:24 pm
Net liability of $600 million.
That’s not even three weeks Government borrowing.
Still $600 million would go along way on Champagne etc at Party Central for the Rugby World Cup next year.
At least someone is drinking Champagne today thanks to the decisions for this and the previous Government.
August 31st, 2010 at 5:25 pm
Winston’s winebox will be being dusted off about now I expect. There’s more than a faint whiff of fish about this, and WP will make full use of it (and the Nat’s farming relationships) over the next few months.
August 31st, 2010 at 6:20 pm
Adolf, it was stability bought with a massive transfer of wealth from one part of the population to the specific investors in SCF. Many of whom invested money only after the guarantee was in place.
It will be very difficultfor you to keep your small government credentials given that you are arguing in favour of what is effectively a large tax and the government handing out free money.
August 31st, 2010 at 6:51 pm
Ben (1.10pm)
Sandy Maier was brought in as Hercules to clean up SCF – unfortunately was the Augean Stables to the power of 10.
The previous CEO is the infamous Lachie McLeod
http://www.stuff.co.nz/timaru-herald/news/3101611/South-Canterbury-Finances-McLeod-resigns
Pic here, needs to be plastered everywhere
http://www.nzherald.co.nz/management/news/article.cfm?c_id=59&objectid=10611916
August 31st, 2010 at 6:57 pm
It would be very interesting to know how many Parliamentarians and their families, and connected parties invested in SCF since the guarantee was erm guaranteed?
August 31st, 2010 at 8:07 pm
It seems that Hubbard the kindly old man he is, lent money to people who could not pay it back. Sure they needed the money but could not pay it back. And Hubbard took security over assets that had no value. Now the taxpayer has to clean this up. The borrowers have got away with it. And Hubbard says it is the Governments’ fault. Perhaps if Hubbard had been a little more hard headed who he lent money to we would not be in this position. I have as much contempt for him as I have for the wide boys in Auckland partying up lenders’ money. They have not been bailed out. The poor lenders have lumped it.
August 31st, 2010 at 8:57 pm
Why should we pay for these investers? I don’t have any spare cash to invest, thanks to the taxes, and now I have to pay for them as well? They chose poorly, so suck it up.losers
August 31st, 2010 at 9:23 pm
Last time I looked, Queen St Farmers weren’t particularly good at assessing value. Unfortunately I think this has occurred here. Queen St Farmers have been the only ones asked to.
September 1st, 2010 at 12:40 am
“Why should we pay for these investers?… They chose poorly…”
Lolz
No they didnt. They chose rightly. And profitably. Hate the game, not the player.
One of the concerns was that it would take ages to get the money if the guarantee was invoked, but even that risk is gone now that the govt has released the money immediately.
And reid, again, seriously?
“Last time I looked, Queen St Farmers weren’t particularly good at assessing value.”
But Hubbard is a expert because he’s a good southern man, and lovely old guy too? WTF?
Giving the guy the benefit of the doubt is one thing. Having to contort yourself into a Gordian knot to find some way it is all some suit-and-tie mofo’s fault and that it is impossible that it was Hubbard who fcuked things up is something else entirely.
You keep saying you dont know the facts. Might I suggest that your ignorance is not so limited. The degree of severity of fcuk-up taking security over something which has no value is not going to come down to the opinion of some Auckland suit. The suit’s valuation would have to be out by several hundred (maybe even thousand) percent for Hubbard not to have fcuked up badly. Intelligent people can disagree about valuation to a certain extent, but its beyond the pale when the difference in opinion is that some guy values the security at zero, and Hubbard values it at as much as he loaned against it.
September 1st, 2010 at 8:41 am
I doubt if anybody from the gummint will look too closely, but if they did, what they would probably find is something like this:
- SCF owned by a stupid old bugger who has exposed his arse big time and is losing control of the whole game
- Sharks swoop in and stack SCF with their guys on the board, management etc
- Good loans sold off at fire sale prices to same sharks under different names/businesses/trusts leaving a fucked shell which they engagingly call the ‘bad bank’
- Same sharks buy up the fucked shell bigtime at further discounted prices (under different aliases) knowing the gummint will pay them out when the deadline runs out
- Sharks pretend to be looking for a buyer to preserve the illusion of legitimacy
- Government pays out the sharks (together with a few other mom-and-pop ‘investors’) PLUS INTEREST
- Sharks have fits of laughter and go off looking for some other sucker